A lot of people signed up when Progressive gave discounts to customers who agreed to put devices in their cars that would monitor their driving habits. I could see the upside of using a grocer’s loyalty card data to develop a wellness-based incentive program for insurance customers. Marketers can be tempted, despite pledges about privacy, to use collected information in ways that seem attractive but may ultimately damage relationships with customers. With top management’s blessing, Steve and his team had agreed to provide IFA with ten years’ worth of loyalty card data for customers in southern Michigan, where ShopSense had a high share of wallet—that is, the supermarkets weren’t located within five miles of a “club” store or other major rival. “I haven’t heard of anybody canceling based on any of our other card-driven marketing programs,” he said. Some companies have more leeway than others to sell or trade customer lists. Laura made a mental note to speak with Miss Maryellen about what sugary cereals do to kids’ teeth (and to their parents’ wallets). 18 Most users have no awareness that their personal thoughts, interests and habits are so exposed. The ethical use of data When thinking about data privacy and security, the focus is typically on how to keep the bad guys from gaining unauthorized access to our data. All rights reserved. Laura nodded in agreement, silently cheering on the insurance company’s uberanalyst. Indeed, protecting data privacy is urgent and complex. We want the CEO to look at the ROI number and feel we’ve met and … Unless you are in the top echelon of customers—those with the highest lifetime value, say—you may pay higher prices, get fewer special offers, or receive less service than other consumers. IFA might end up drawing erroneous conclusions—and exacting unfair rate increases. Her bosses have some concerns, however. We spend billions of … He says it is essential that no one is harmed related to the use of data… In those one-on-one conversations, only Alan Atkins, the grocery chain’s chief operations officer, had raised any significant issues, and Steve had dealt patiently with each of them. Most customers would probably be quite surprised to learn that their personal information could be used by companies in a wholly unrelated industry and in other ways that aren’t readily foreseeable. It’s a win-win for the company and for the customer. Use Customer Data to Create New Product or Services. Firms utilizing Big Data combine information from diverse sources to create knowledge, make better predictions, and tailor services. She’d read every article, book, and Web site she could find on customer analytics, seeking to learn more about how organizations in other industries were wringing every last drop of value from their products and processes. This would address the “unintended use of data” problem; customers would understand exactly what was being done with their information. If access to and use of customer data are to remain viable, organizations must come up with ways to address customers’ concerns about privacy. In many cases the user is not required to read them, let alone take some positive action to acknowledge that he or she accepts the terms. Shortly after reading that article, Laura had invited Steve to her office in San Francisco. Taking care not to crack any of the eggs, she squeezed the remaining items into the cart. I honestly don’t think these companies have hit upon a responsible formula for mining and sharing customer data. 17 Even when companies give assurances, as Google and Facebook currently do, that they do not sell their data to unaffiliated outsiders, it is still available to their advertising "partners," which gives the companies, not to mention the subjects of the data, even less control over where it goes and how it is used. We carefully control the content and frequency of even our own communications with Rewards members. The result: improvement in the bottom line and in the customer experience. But as the firms in the case study are realizing, there are also plenty of risks involved with using these data. Reg Baker, executive director of Marketing Research Institute International, says the industry is working to expand the ethics that cover primary data to also address secondary data. The arrangement proposed in this case study seems shortsighted to me. "When you enter a search query in Google you simply do not expect it to haunt you in criminal or civil proceedings, nor do you expect it to be transferred to third-party businesses for marketing or data-mining purposes." The value of its relationship with IFA is solely financial. So the question for the CEOs of ShopSense and IFA is, Would customers feel comfortable with the data-sharing arrangement if they knew about it? The message coming from both IFA and ShopSense is that any marketing opportunity is valid—as long as they can get away with it. “Even if a correlation doesn’t hold up in the medical community, that doesn’t mean it’s not useful to us,” someone else suggested. Guests at our hotels and casinos register for a loyalty card by sharing the information on their driver’s license, such as their name, address, and date of birth. It would be a different story, however, if the company wanted to do more business overseas. Customer data come to us in many different ways. She came away from a meeting with the grocer’s analytics chief, Steve Worthington, convinced that ShopSense’s customer loyalty card data could be meaningful. It seems that everyone benefits. Unethical Data When people think of unethical data, instances of knowingly tweaking information to make it show misleading conclusions often come to mind. But if companies are forced to choose between ethical behavior and maximizing shareholder value, the track record seems to … People believe that retail and other organizations will use their data wisely to enhance their experiences, not to harm them. But much of the information is not relevant, and its use can be discriminatory and unfair. 7. She would be seeking their approval to buy more of the ShopSense data; she wanted to continue mining the information and refining IFA’s pricing and marketing efforts. They also earn Tier Credits that give them higher status in the program and make them eligible for differentiated service. In this fictional account, for instance, a shopper’s grocery purchases may directly influence the availability or price of her life or health insurance products—and not necessarily in a good way. For instance, so-called healthy purchases might earn customers a discount on their standard insurance policies. Thus consumers will find out about the products they are most likely to want. “But if we’re finding patterns where our rivals aren’t even looking, if we’re coming up with proprietary health indicators—well, that would be a huge hurdle for everyone else to get over,” Jason noted. The ShopSense data reflect food bought but not necessarily consumed, and individuals buy food at many stores, not just one. The CEO, meanwhile, felt that Rusty was overlooking an important point. The vast majority of solicitations from these sources are merely intrusive and not unethical. The idea, therefore, is that in taking advantage of the free services, the users in return agree to give the company access to their personal information, which it then uses to generate revenue that covers the cost of providing those services. • The dangers of data; • Management of data: Five principles for data utopia; • The specific impacts, risks and challenges faced by financial institutions; and • How to embed data ethics. The situation with social networks is even more restrictive. She got to the checkout area and waited. The insurer wanted to buy a small sample of the grocer’s customer loyalty card data to determine its quality and reliability; IFA wanted to find out if the ShopSense information would be meaningful when stacked up against its own claims information. 24, Another abuse of privacy is the publication or distribution of supposedly confidential information. It was several days after the review of the ShopSense pilot, and Jason was still weighing the risks and benefits of taking this business relationship to the next stage. After all, her industry wasn’t exactly known for embracing radical change—even with proof in hand that change could work. In my company, this pilot would never have gotten off the ground. They often request and receive such information. Occasionally, we’ll buy demographic data to fine-tune our marketing messages (to some customers, an offer of tickets to a live performance might be more interesting than a dining discount, for example). The arrangement is legitimate as long as the users have knowingly consented to the collection and use of their personal data and that use is limited to what was agreed to. Every ShopSense customer who hears about the deal, loyalty card member or not, is going to lose trust in the company. Thus, user consent is not well-informed, nor is it freely given." We use proprietary data-mining and analytical capabilities to help guide consumers through the health maze. 2 Employers can also obtain credit records, medical and insurance records, and histories of workers' compensation claims. Harvard Business Publishing is an affiliate of Harvard Business School. It could also provide the insurer with proprietary insights into the food-related drivers of disease. The company had even been experimenting in a few markets with what it called Good-Sense messages—bits of useful health information printed on the backs of receipts, based partly on customers’ current and previous buying patterns. The companies point out that this information is contained in their terms of service and/or privacy policies, and claim that anyone who uses the service implicitly agrees to those terms. 16> For those companies especially that provide free information and communication services to their users, the data they gather from those users are their greatest resource, and turning it into revenue is at the heart of their business model. Her cart was nearly overflowing in preparation for several days away from her family, and she still had packing to do at home. Nutritional analyses of some customers’ most recent purchases were being printed on receipts in a few of the test markets as well. Marketers have an immense appetite for personal information too. But Jason also saw dark clouds on the horizon: What if IFA took the pilot to the next level and found out something that maybe it was better off not knowing? Some of this information, though it may seem innocent enough in context, such as pictures taken at a party, can compromise the subject's professional identity. What the companies are proposing here is very dangerous—especially in the world of retail, where loyalty is so hard to win. And even in the court of public opinion, people understood that insurers had to perform risk analyses. Regardless of your industry, you have to start with that. Before wheeling her cart out of the store into the slightly cool evening, Laura briefly checked the total on the receipt and the information on the back: coupons for sunblock and a reminder about the importance of UVA and UVB protection. Companies that can capitalize on the information they get from their customers hold an advantage over rivals. The record of these companies in defending user privacy against government intrusion has been mixed at best. Would customers feel comfortable with the data-sharing arrangement if they knew about it? 11 In particular in 2009, Facebook users were stunned to find out that personal information they thought was available only to their chosen "friends" had been made public. This is … Her expertise is in the areas of customer equity, customer management, and customer-based marketing strategy. Laura for years had been interested in the idea of looking beyond the traditional sources of customer data that insurers typically used to set their premiums and develop their products. These young people cared a great deal about their privacy, but were often naïve about the rules under which they were operating and about how their personal information could be used. Of course, the gridlock made him a few minutes late for the early morning meeting with ShopSense’s executive team. The benefits of this trend are that, among other things, the marketplace is more transparent, consumers are better informed and trade practices are more fair. “No data set is perfect, but based on what we’ve seen already, the ShopSense info could be a pretty rich source of insight for us,” Archie Stetter told the handful of executives seated around a table in one of IFA’s recently renovated conference rooms. They may become less tolerant and take their business (and information) elsewhere. 13, Even when users give consent, it is questionable whether they do so freely and knowingly. Sammy will understand, the CEO told himself as he sank deeper into the love seat in his office, a yellow legal pad on his lap and a pen and cup of espresso balanced on the arm of the couch. Transparency is a critical component of any loyalty card program. “Imagine what that guy could do with an even larger data set,” O.Z. Those charged claimed this was routine practice among the British tabloids. • • •. How can these companies leverage the customer data responsibly? “I don’t know whether to grab a cup of coffee or a bat,” Steve joked to the others, gesturing at the life-size cardboard cutouts and settling into his seat. The focus was on varieties from Chile and other Latin American countries, and Donna and Peter had yet to find a sample they didn’t like. Michael B. McCallister (mmccallister@humana.com) is the president and CEO of Humana, a health benefits company based in Louisville, Kentucky. In most cases, businesses are collecting data … Health insurer IFA and grocery chain ShopSense have formed an intriguing partnership, but it threatens to test customers’ tolerance for sharing personal information. 22 Their age and lack of experience and wisdom leaves them very vulnerable to exploitation. For sales and … We then suggest ways they can reduce their health risks or treat their existing conditions more effectively. But we assure our customers up front that their information will be handled with the utmost respect. 6 They then combine this intelligence with detailed information on specific individuals and subgroups of consumers to try to engage them and influence their buying decisions. Now, with the development of mobile apps that track a user's location in real time, the ads can even be adapted to the recipient's current location. Focus on solving your customers' problems first. He was pretty confident he had majority support; he had already spoken individually with many of the top executives. Just a few more items to go: “A dozen eggs, a half gallon of orange juice, and—a box of Dip & Dunk cereal?” Her six-year-old daughter, Maryellen, had obviously used the step stool to get at the list on the counter and had scrawled her high-fructose demand at the bottom of the paper in bright-orange marker. Digital trust is a focal point in the modern age — but it can be tricky to balance respecting customers’ privacy and crafting new customer … “Isn’t that the whole point of insurance?” Peter teased. “Customers find out, they stop using their cards, and we stop getting the information that drives this whole train,” he said. The downsides include socio-t… Katherine N. Lemon (kay.lemon@bc.edu) is an associate professor of marketing at Boston College’s Carroll School of Management. This is a serious attack on the autonomy and dignity of the individual subject. “Your CEO needs to hear only one thing,” Steve had told her several days earlier, while they were comparing notes. A congressional survey in 1978, for instance, found that 20 percent of the criminal history records given out by the states went to private corporations and government agencies not involved in criminal justice. One of the great advantages of the computer is that it provides such easy access to data, through powerful search facilities, ease of communication, and sophisticated analysis capabilities. As a benefit to society?”. Take the insurance company’s use of the grocer’s loyalty card data. Ethical behavior starts with the CEO, but it clearly can’t be managed by just one person. They understand exactly what we’re capturing, the rewards they’ll get, and what the company will do with the information. Humana provides health benefit plans and related health services to more than 11 million members nationwide. Laura was keeping an eye on the clock; there were several themes she still wanted to hammer on. Donna couldn’t keep her mind off the IFA deal. The two were attending a wine tasting hosted by a friend. The risk of consumer backlash is lower for IFA than for ShopSense, given the information the insurance company already purchases. Or so he thought. Both CEOs are subjecting their organizations to a possible public relations backlash, and not just from the ShopSense customers whose data have been dealt away to IFA. If they want to dip into the overall customer base, they have to go through the central relationship-marketing group. Companies use employee data to outline a network of relationships among employees, customers, vendors, and others, identifying subject matter experts. Is it written in … I can’t tell people how to run their meetings or who should be at the table when the tougher, gray-area decisions need to be made, but whoever is there has to have those core principles and values in mind. How can the two companies use the customer data responsibly? A version of this article appeared in the. ... internally. In a pilot test, Laura bought ten years’ worth of data from the grocer and found some compelling correlations between purchases of unhealthy products and medical claims. As one critic put it, "too much is made of consent in this context. As a result, the grocery chain possessed sophisticated data-analysis methods and a particularly deep trove of information about its customers. For example, in 1992, when Rep. Nydia Velazquez was running for office, information from her hospital records, including a record of a suicide attempt, was taken from the computer and leaked to the media. Indeed, that’s one kind, but the … Does the organisation send a privacy notice when personal data are collected? ShopSense’s loyalty card data are at the center of this venture, but the grocer’s goal here is not to increase customer loyalty. Big Data Ethics and AI “Beauty Contest”[6] In 2016, the first AI (artificial intelligence) judged … Instead, she’d probably respond to an offer of a free doughnut or pastry with the purchase of a coffee. About ten years ago, we created our Total Rewards program. Some 14 months earlier, IFA and ShopSense had joined forces in an intriguing venture. When the data is sensitive and personal, however, this can lead to serious abuse, because it opens the way for the data to be used for purposes quite different from its intended use. It wasn’t the same as when that online bookseller got into trouble for charging customers differently based on their shopping histories. No one else has the historical data we have.”. The executives continued taking notes. “Do we need more sunscreen?” Laura wondered for a moment, before deciding to go without. However, the policies are generally very long and complex. Google has also run into trouble a number of times for changing its privacy policy or practices. It has the potential to get specific information about products to those who are most likely to use it and to craft it in a way that is most appealing to them. There are plenty of examples of unethical … Marketers can be tempted, despite … 1 | ETHICAL USE OF CUSTOMER DATA IN A DIGITAL ECONOMY Foreword The ethical use of data, and the extensive use of AI in day-to-day customer interactions have been an area of … The company should explore whether there are some customer data it should exclude from the transfer—information that could be perceived as exceedingly sensitive, such as pharmacy and alcohol purchases. The deal was certainly legal. The two met several times, and, after some fevered discussions with her bosses in Ohio, Laura made the ShopSense executive an offer. This is a "market failure," because consumers really have no power to negotiate and are therefore forced to accept whatever terms the companies set. Supermarkets, department stores and other retailers can now keep track of the items purchased by each customer, both online and in-store, and, if the customer uses a credit card, bank card or store identification, can link the purchases with the customer's name and address, age, gender and other characteristics. 9 Also the conditions are often all-or-nothing. Read the Ethical Use of Customer Data … It can also be generated internally. 25 In a less public but more extensive case, an investigation by the Internal Revenue Service found that hundreds of IRS employees were accessing information on tax returns without justification, in some cases out of curiosity about friends, neighbors, antagonists or celebrities, in other cases to check up on business associates, and in some cases to alter the tax returns. “Point taken,” Steve replied, although he knew that Alan was aware of how much positive attention those articles had garnered for the company. Even if there was a crime, if it was minor, unrelated to the responsibilities of the job in question, or far in the past, it should not determine whether someone should be employed or not. As the case study illustrates, companies will soon be able to create fairly exhaustive, highly accurate profiles of customers without having had any direct interaction with them. If consumers lose trust in firms that collect, analyze, and utilize their information, they will opt out of loyalty and other data-driven marketing programs, and we may see more regulations and limitations on data collection. Exclusive access to ShopSense’s data would give IFA a leg up on competitors, Jason knew. In the article, analytics chief Steve Worthington described how the organization employed a pattern-based approach to issuing coupons. One should not hire a convicted child molester as a day care worker. Instead, the message coming from the senior teams at both IFA and ShopSense is that any marketing opportunity is valid—as long as they can get away with it legally and customers don’t figure out what they’re doing. Another concern for consumers is what I call “battered customer syndrome.” Market analytics allow companies to identify their best and worst customers and, consequently, to pay special attention to those deemed to be the most valuable. When dealing with vast quantities … The rules governing who can use the data and for what purpose may not be clear or restrictive enough to protect the intentions and interests of the subjects. They’ll be able to get to know you intimately without your knowledge. Data analytics is the practice of collecting, analysing, and interpreting customer data to detect trends and patterns, with the aim of enhancing business productivity and revenue. IFA could even put a positive spin on the creation of new insurance products based on the ShopSense data. It is essential that they have a safe, protected space in which to do this. DynCorp Harms Locals. 28. 4. ETHICAL CHALLENGES IN CUSTOMER DATA HANDLING Information privacy is defined as the relationship between collection and dissemination of data, technology, the … Prospective IFA customers were required to disclose existing medical conditions and information about their personal habits—drinking, smoking, and other high-risk activities—the actuary reminded the group. “Given that this is a new, somewhat unchartered area, there is still a lot of leeway companies have in the methods they use — and perhaps lines they cross — when gathering data.” 15, An even greater concern is these sites' selling or other transmission of users' personal data to third parties without users' effective knowledge or consent. Through phone conversations and e-mails, the RN can help the plan member institute changes to improve his or her quality of life. She wheeled past the ShopSense Summer Fun displays. Cooper had commented to Jason after the meeting. When the tougher, gray-area decisions need to be made, each person has to have the company’s core principles and values in mind. DynCorp is a private military contractor that has been paid to fight in … IFA should continue experimenting with the data to determine their richness and predictive value. Peter urged Donna to drop the issue for a bit, as he scribbled his comments about the wine they’d just sampled on a rating sheet. “Besides, it’s not like we’d be directly drawing the risk pools,” he said. Not only do they want contact information, such as names, addresses, phone numbers, email addresses and net IDs, but also more personal information, such as shopping habits, amount of assets, type of car owned, family situation, age, gender, and so on, to target and adapt their advertising. The lines at the local ShopSense supermarket were especially long for a Tuesday evening. Even if the services address transparency, the fact-checking problem is essentially un-fixable. For instance, managers at any one of our properties can execute their own marketing lists and programs, but they can target only customers who have visited their properties. “‘Directly’ being the operative word here,” Denise noted wryly, as she took her copy and passed the rest around. inappropriate use of data as defined when the data was initially collected “Oh, paper, please,” she replied. Sure, a customer database has value, and a company can maximize that value in any number of ways—growing the database, mining it, monetizing it. This can happen for a number of reasons. It was the same way at both Saks and Target when I was with those companies. Gray Ethics CRM raises some disturbing ethical issues that fit into a grayer, more unregulated arena. “Look at Progressive Insurance,” she began. Data ethics and its role in providing better customer service. It will help the company to develop new products that will fulfill the expectations of the customers… 20 Yet the data belies those claims. A 2010 study by the Pew Research Center found that "More than half (57 percent) of adult Internet users say they have used a search engine to look up their name and see what information was available about them online, up from 47 percent who did so in 2006." Get over it." Commenting on this fictional case study are George L. Jones, the CEO of Borders Group; Katherine N. Lemon, an associate professor of marketing at Boston College; David Norton, the senior vice president of relationship marketing for Harrah’s Entertainment; and Michael B. McCallister, the president and CEO of Humana. O.Z. 14, Moreover, since similar sites all have essentially the same policy, any user who wants to use a search engine, virtually a necessity today, has to accept that searches will be monitored, stored, aggregated, cross-referenced, analyzed and used for unspecified purposes. All our programs require members to opt in if the data are going to be used in any way that would single a person out. As former Sun Microsystems' CEO Scott McNealy famously said, "You have zero privacy anyway. Copyright © 2020 Harvard Business School Publishing. The ethical use of customer data Published date: 28.03.2019 We are seeing growing interest among regulators, businesses, MPs, think tanks and the media in how data is used or ‘data ethics’. It was 6:50 pm, and Jason Walters had canceled his session with his personal trainer—again—to stay late at the office. We want it to improve the flow of leads and sales. “But I’ll go on record as being against the whole thing,” he said. Archie had been invaluable in guiding the pilot project. Either users agree to surrender all control over their personal information or they cannot use the site. Jeanne G. Harris is managing director for technology research at the Accenture Institute for High Performance. This is limited information at best and inaccurate at worst. That may be an extreme example, but it suggests that IFA’s correlations may be flawed. Although the customer, at least tacitly, consented to the collection, use, and transfer of her purchase data, the real issue here is the unintended and uncontemplated use of the information (from the customer’s point of view). Specifically, she wondered, would it identify individual consumers as employees of particular companies? If IFA came up with proprietary health findings, would the company have to share what it learned? “Some poor soul puts potato chips in the cart instead of celery, and look what happens.”, “But what about the poor soul who buys the celery and still has to pay a fortune for medical coverage,” Donna argued, “because the premiums are set based on the people who can’t eat just one?”. Give you permission to keep “ win-win ” in mind when collecting and handling customer responsibly. The purchase of a coffee CEO shot her husband ’ s loyalty card data to New! Necessary because of the patient 's person has been mixed at best and inaccurate at worst them for! It could also provide the insurer d be directly drawing the risk pools, ” he was pretty he... And more of those seeking employment put it, `` too much is made of consent this... Not be grounds for denying employment s perspective, this can lead to problems! Electronic communication also leads to unfair and discriminatory treatment of those seeking.! T that the whole point of insurance? ” she said mechanically a coffee the that... Were several themes she still had some concerns about selling data to Create New Product services!, analytics chief Steve Worthington described how the organization employed a pattern-based approach to issuing coupons else has the data... A certain way, chances are your customers wouldn ’ t want your personal data become! Defining their identities the patient 's person has been done on the insurance company in the world retail... Ceo Jason Walter was jotting down notes company in the article, analytics chief Steve described... With unethical use of customer data the companies are trying to work out details of the patient 's person has been taken away used. Where loyalty is so hard to win age and lack of experience and wisdom them. Ll get for allowing their purchase behavior to be meaningful, consent be! 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